SB 244

Abstract

This bill continues the practice of amending periodically the Delaware Statutory Trust Act (the “Act”) to keep it current and to maintain its national preeminence. The following is a section-by-section review of the proposed amendments of the Act. Section 1. This section amends Section 3801 of the Act to add new definitions for "document" and "electronic transmission," which terms appear in new Section 3826 among other places in the Act. Section 2. This section amends Section 3804(a) of the Act to confirm that a trust may enter into contracts on behalf of a series of the statutory trust with and on behalf of another series of the statutory trust or with itself. This Section also confirms certain circumstances under which a statutory trust shall be the “debtor” in connection with liens or security interests granted in any assets of a series or any assets associated with a series of the statutory trust. Section 3. This Section amends Section 3805(f) of the Act to clarify that a trustee is not a necessary party to a contract or other instrument to which a statutory trust is a party solely because a trustee holds legal title to statutory trust property. Section 4. This section amends Section 3806 of the Act to conform with the addition of the defined term "electronic transmission" in Section 3801. Sections 5 and 18. These sections amend Sections 3807(e) and 3854(c) of the Act to eliminate the requirement that the Secretary of State issue a certified copy of any certificate filed by the registered agent changing the address of the registered office or the name of the registered agent. These sections also amend Sections 3807(e) and 3854(c) of the Act to confirm that the conversion of the registered agent or a division of the registered agent in which a resulting person succeeds to all of the registered agent business of such registered agent shall be deemed to be a change of name for purposes of these sections of the Act. These sections also amend Sections 3807(f) and 3854(d) of the Act to eliminate the requirement that the Secretary of State issue a certificate in connection with the resignation of the registered agent of a statutory trust or foreign statutory trust and the appointment of the successor registered agent. Sections 5 and 18. These sections also amend Section 3807(g) and Section 3854(e) of the Act to provide that the resignation of a registered agent of a statutory trust or foreign statutory trust without appointing a successor must be done on a single trust basis by paying a fee and filing a certificate of resignation with the Secretary of State. These sections also amend Sections 3807(g) and 3854(e) of the Act to add requirements regarding the content and form of the certificate of resignation filed with the Delaware Secretary of State when the registered agent resigns without appointing a successor, and provide that such information regarding the communications contact that must be included in such a certificate shall not be deemed public. Section 5. This section also amends Section 3807 of the Act by adding new subsections (i)-(m) to prescribe the duties of a registered agent; require that persons or entities serving as registered agent for more than fifty entities (a “Commercial Registered Agent”) be generally open during normal business hours and have a natural person present to operate such office and communicate with the Secretary of State on request; require Delaware statutory trusts to provide registered agents with a designated natural person to receive communications from the registered agent and require the registered agent to maintain in its records the identity of such persons; authorize the Secretary of State to issue regulations to enforce these provisions; authorize the Secretary of State to bring a lawsuit in the Court of Chancery to enjoin any person or entity from acting as a registered agent, or as an officer, or director or managing agent of a registered agent, any person or entity who fails to comply with the statutory requirements, who has been convicted of a felony or any crime involving dishonesty, fraud or moral turpitude, or who has used the office of registered agent in a manner intended to defraud the public; and provide that the certificate of trust or registration of a statutory trust or foreign statutory trust will be cancelled if it fails, within a prescribed period, to obtain and designate a new registered agent if the Court of Chancery enjoins any person or entity from acting as a registered agent for such statutory trust. Section 6. This section amends Section 3810(d) of the Act to include a reference to a certificate of division. Section 7. This section amends Section 3811(a)(4) of the Act to provide for the manner in which a certificate of division must be executed. Section 8. This section amends Sections 3812(b) and 3812(c) of the Act to include a reference to a certificate of division. Section 9. This section amends Section 3813(a)(2) of the Act to provide for the fee payable to the Delaware Secretary of State for the filing of a certificate of division pursuant to the Act, Section 3813(a)(6) to provide for the fee for the issuance of any certificate issued via the Secretary of State's online services and Section 3813(a)(7) to provide for the fee payable for a written report of a record search. Sections 10 and 18. These sections amend Section 3814(a) and Section 3854(a) of the Act to clarify requirements regarding the name under which a statutory trust or a foreign statutory trust may register with the Secretary of State. Section 11. This section amends Section 3815(a) of the Act to provide a majority vote default rule for a merger or consolidation entered into by a statutory trust registered as an investment company under the Investment Company Act of 1940 unless otherwise provided in the governing instrument of such statutory trust. This amendment provides that the amendment does not apply to statutory trusts formed prior to the effectiveness of the amendment unless otherwise provided in the governing instrument of such statutory trust. Section 11. This section also amends Section 3815(h) of the Act to confirm that no appraisal rights are available with respect to a beneficial interest or another interest in a statutory trust, including in connection with the enumerated transactions unless otherwise provided for in the enumerated documents and adds reference to a plan of division as a document that may include appraisal rights. Section 12. This section amends Section 3819(d) of the Act to confirm that a statutory trust may maintain its books, records and other information in other than paper form (including electronic form) if such form is capable of conversion into paper form within a reasonable time. Section 13. This section amends Section 3821(b) of the Act to provide a majority vote default rule for approving a conversion of a statutory trust registered as an investment company under the Investment Company Act of 1940 unless otherwise provided in the governing instrument of such statutory trust. This amendment provides that the amendment does not apply to statutory trusts formed prior to the effectiveness of the amendment unless otherwise provided in the governing instrument of such statutory trust. Sections 13 and 14. These sections amend Sections 3821(f) and 3823(c) of the Act with regard to certifications provided by the Secretary of State in connection with the filing of a certificate of transfer, a certificate of transfer and domestic continuance and a certificate of conversion to non-Delaware entity. Section 14. This section also amends Section 3823(b) of the Act to provide a majority vote default rule for approving a transfer or domestication or continuance of a statutory trust registered as an investment company under the Investment Company Act of 1940 unless otherwise provided in the governing instrument of such statutory trust. This amendment provides that the amendment does not apply to statutory trusts formed prior to the effectiveness of the amendment unless otherwise provided in the governing instrument of such statutory trust. Section 15. This section adds new Section 3824 of the Act to provide that, upon motion by the Attorney General, the Court of Chancery may cancel the certificate of trust of any statutory trust for abuse or misuse of its statutory trust powers, privileges or existence Section 16. This section adds new Section 3825 of the Act to enable a statutory trust to divide into one or more newly formed statutory trusts with the dividing trust continuing its existence or terminating its existence, as the case may be. Section 17. This section adds new Section 3826 of the Act, which establishes non-exclusive, safe harbor methods to reduce certain acts or transactions to a written or electronic document and to sign and deliver a document manually or electronically. The terminology in Section 3826(a) is based on analogous provisions in existing Sections 3806 of the Act, the Delaware Uniform Electronic Transactions Act ("UETA"), and the Model Business Corporation Act, with modifications. Section 3826(a) permits statutory trust transactions (such as entering into agreements of merger not filed with the Secretary of State) to be documented, signed and delivered through "Docusign" and similar electronic means. The Section 3826(a) safe harbor provisions apply solely for purposes of determining whether an act or transaction has been documented, and whether a document has been signed and delivered, in accordance with the Act and the governing instrument. Section 3826(a) does not preempt any statute of frauds or other law that might require actions be documented, or that documents be signed and delivered, in a specified manner. Section 3826(a) clarifies how its provisions operate in connection with a transaction conducted pursuant to UETA. To the extent UETA does not apply to a transaction (under Section 12A-103 of UETA) because the transaction is governed by the Act, the parties to the transaction can satisfy the Act by complying with Section 3826(a). Section 3826(b) addresses certain actions and documents that are not governed by Section 3826(a). There is no presumption that these excluded items are prohibited from being effected by electronic or other means, but Section 3826 may not be relied on as a basis for documenting an act or transaction, or signing or delivering a document, if the exclusions set forth in Section 3826(b) apply. Certain of these excluded items are governed by separate provisions that facilitate the use of electronic media, including documents filed with the Secretary of State (governed by Section 3812(a)). Section 3826(b) permits governing instrument provisions that restrict the use of Section 3826(a), but those restrictions must be expressly stated. A provision merely specifying that an act or transaction will be documented in writing, or that a document will be signed or delivered manually, will not prohibit the application of Section 3826(a). Section 3826(c) addresses the interaction between the provisions of the Act and the Electronic Signatures in Global and National Commerce Act (the "E-Sign Act"). Section 3826(c) evidences an intent to allow the Act to govern the documentation of actions, and the signature and delivery of documents, to the fullest extent the Act is not preempted by the E-Sign Act. Section 18. This section also amends Section 3854(b)(2)c. of the Act to clarify the types of foreign entities that may be a registered agent of a foreign statutory trust. Section 19. This section provides that the proposed amendments to the Act shall become effective August 1, 2020.